Does a win bonus help to increase profit or wins in professional team sports?
In this contribution, we try to investigate the impact of a win bonus on the winning percentage, the competitive balance, the owner profits and the overall quality in a professional sports league in a simple game theoretic approach. We starts from the well-known Quirk and Fort (1992) two-club model. In this model, we introduce a premium system consisting of a win bonus that is paid on top of a fixed salary. Assuming that players are motivated to increase effort if their salary depends on the winning percentage, we derive the Nash-Cournot equilibrium under both the profit and a win maximisation hypothesis. The impact of a premium system turns out to be rather complex, given the fact that clubs react to the strategies of other clubs in the league. The team that introduces a premium system can expect to increase its profits or its winning percentage by paying a bonus combined with a reduced fixed salary. A crucial factor, though, is the players’ response to the win bonus. If the team’s effort is not enhanced enough by the bonus, the team’s profits and wining percentage can go down. Also the effect that the winning percentage has on club revenue is an important factor.
|Date of creation:||Jun 2007|
|Publication status:||Published in International Journal of Sport Finance|
|Contact details of provider:|| Web page: http://www.cdes.fr/index.php?id=fr69|
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:spe:cpaper:0713. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Victor Matheson)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.